Govt to set up three telecom funds with Rs 17,500-cr corpus

Last Updated: Sun, Mar 31, 2013 04:14 hrs

The government has finalised a blue print to set up three specific funds, with a combined corpus of Rs 17,500 crore, to help the telecom sector develop a strong domestic manufacturing base, encourage entrepreneurship and promote research & development.

These funds would provide its recipients start-up and angel funding, finance incubation centres and offer soft loans, besides giving interest subsidy to banks lending to telecom companies.

Of the total corpus, about Rs 10,000 crore would be allocated for the Telecom Manufacturing Promotion Fund (TMPF), Rs 2,500 crore for the Telecom Entrepreneurship Promotion Fund (TEPF) and Rs 5,000 crore for the Telecom Research & Development Fund (TRDF). The Department of Telecommunications (DoT) has prepared the modalities following a proposal of the working group for the 12th Five-Year Plan. The group had recommended such a fund be created to promote indigenous development of telecom products. The funding would be done by the government.

Over the next five years, TEPF would give seed capital to at least 1,000 innovative and successful enterprises focused on providing telecom solutions for India. As part of this plan, about Rs 400 crore would be used for providing angel funds to telecom incubators, both existing and new, while about Rs 600 crore would be used to create Public Telecom Venture Fund (PTVF). Besides, the government also plans to join hands with venture capital firms to facilitate funding to telecom start-ups. The government would spend about Rs 1,200 crore on this.

It has been proposed that an incubator would get Rs 3 crore to Rs 30 crore at different stages of operation, their maximum management fee being at three per cent rate. Six venture funds would be set up with Rs 200 crore each to support early-stage ventures. Venture capital firms would have to bring in 1.5-2 times the funding to qualify.

PTVF, meant for commercialisation, would offer a maximum of Rs 15 crore to a company in the form of equity and soft secured loans.

TMPF would provide two facilities. First, it would offer Indian product companies soft loans to fund 50 per cent of their project cost, at an interest rate of three per cent, for specific product development and commercialisation activities. There would be a two-year moratorium to accommodate product commercialisation time, after which these companies would have to pay back the loans in three equal instalments in the third, fourth and fifth years after disbursement. Physical assets the companies would purchase from the loan could be used as collateral.

Second, it would give interest subsidy to commercial banks, which would, in turn, lend to telecom companies. Discussions have been proposed with Exim Bank for financing telecom equipment makers at a low interest rate.

About 75 per cent of TRDF's Rs 5,000-crore corpus would be used to support product development firms, including start-ups. About 20 per cent of the fund would be used to support Indian companies focusing on intellectual property rights (IPR) in the telecom sector. The government could provide grants or soft loans to about 25 companies after their project proposal is approved. However, a company would have to bring in at least 50 per cent of the project cost.

The companies proposing to work on IPR creation and acquisition of international patents would get government support in the form of soft secured loans, at a minimum interest rate of three per cent.

An 11-member apex council, common for the three funds, would provide policy direction and implementation guidelines, besides assessing the progress and ensuring consistent governance.

According to a recent discussion, the allocation of Rs 10,000 crore would be in phases over the 12th Plan and income generated would be ploughed back into the fund every year.

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